Margarete Steiff Gmbh Business Information, Profile, and History

Company Perspectives:

Only the best is good enough for our children.--Margarete Steiff, company founder.

History of Margarete Steiff Gmb H

Margarete Steiff GmbH is the largest manufacturer of stuffed toys in Germany and one of the most recognized brands of toys in the world. Best known for its pricey and highly collectible teddy bears, in 1997 the company celebrated the 150th anniversary of the birth of its founder and namesake. Though the company's toys are sold around the world, all are handmade in Germany, and about 66 percent of revenues are generated domestically. According to Bernhard M. R&ouml⁄er, president of the toymaker at that time, the family-owned company churns out about 15 million stuffed toys every year, including more than a quarter of a million teddy bears. R&ouml⁄er noted the Steiff mystique in a 1997 Forbes article: "What you have in your hand when you look at a piece of Steiff is a true masterpiece. Our animals show their souls."

The secondary market for early examples of the company's toys dominated media coverage of Steiff in the 1980s and 1990s, but a truly unique and often overlooked feature of the company is the circumstance surrounding its creation. Established in the 19th century, an era when women had few legal rights and commanded little social standing, the toymaker was created and run by a handicapped woman. Though Margarete Steiff's parents feared that her siblings were destined to lives of hard work to support their sister, it was the wheelchair-bound Margarete who founded a family dynasty that has endured for more than a century.

19th Century Origins

Appolonia Margarete Steiff was born in the small southern German town of Giengen in 1847. Third-born of her family, she was crippled with polio as a toddler and confined to a wheelchair her entire life. Despite her infirmities, young Gretle's parents encouraged her to attend grade school. She began taking sewing classes with her two older sisters in the 1850s and learned to operate a sewing machine backwards so that she could use her stronger arm to work the device. Steiff soon became so proficient a seamstress that she and her older sister, Pauline, began a home-based business making and selling women's clothing. Margarete began to offer felt clothing and outerwear under her own name in 1879 at the age of 32.

Steiff's toymaking career began almost by accident that year, when the entrepreneur made some elephant-shaped pincushions as gifts for family and friends. The tiny animals became so popular that Steiff began to make a few to be kept on hand for retail sale. According to the 1991 book Steiff: Sensational Teddy Bears, Animals & Dolls by Rolf Pistorius, Gretle's "pincushions" were being used more often as toys; they were more durable than the pretty, but delicate, dolls of the period, with their porcelain heads and hands, and they were cuddlier than wooden and sheet metal toys. An elephant with an s-shaped trunk would become the company's first trademark. Steiff added riding and pull toys in 1886 and was manufacturing nearly 5,500 units annually by the end of the decade. At the urging of her brother Fritz, the toymaker moved into a purpose-built factory in 1889.

By 1893, when the company was officially registered as Margarete Steiff GmbH, toy sales had far outstripped dressmaking and Steiff had published its first illustrated catalogue. The line of stuffed animals, which by this time included lions, dogs, donkeys, and dolls, generated DM 28,000, versus DM 12,000 from apparel. The founder's brother, Fritz, joined the company as a sales representative that same year. Appearances at important trade shows helped broaden the company's market reach. Buoyed in part by exports, sales had more than doubled to DM 90,000 by 1897 when total employment numbered 40.

Fritz's children began to enter their aunt's business around the turn of the century. According to a June 1988 article in Antiques & Collecting magazine, two of Gretle's nieces helped supervise cottage workers. But it was Fritz's six sons who would assume leadership positions in the business. The eldest, Richard, joined the firm in the 1890s. He introduced Steiff products to the internationally renowned Leipzig toy fair in 1894 and designed a zoo-full of animals after the turn of the century. Richard's brother Franz, a textiles specialist, joined the company as an administrator in 1898. Paul became a designer with the family firm in 1899, Otto came on board as an international distributor and advertising specialist around 1900, and Hugo took charge of quality control in 1906. Thus a comprehensive management team was in place by the time Franz died in 1908 and Margarete passed in 1909. Hugo and Otto were elected co-managing directors, while Richard and Paul carried on their work on the creative side of the company. A sixth sibling, Ernst Steiff, finally joined the firm in 1927.

Margarete Steiff had established a reputation as a generous employer, and her nephews carried on that tradition after her passing. Among other benefits, the company offered low-rent apartments and low-interest mortgages to its staff, which by 1909 numbered nearly 3,000.

Teddy Bear Rage Spurs Rapid Growth After the Turn of the 20th Century

Though the company had begun making stuffed bears as early as 1892, the "teddy" bears for which the toymaker would become world-famous did not come into play until after the turn of the 20th century. Among the zoo animals Richard Steiff designed in 1902 was a bear with jointed arms and legs. The company sold 3,000 bears to Hermann Berg, a representative of New York's Geo. Borgfelt & Co., in the spring of 1903, but the Steiffs were otherwise disappointed in the demand. Little did the family know that U.S. political cartoonist Clifford Berryman had by that time touched off a craze that would help launch the company's biggest selling toy of all time.

The incident arose in 1902, when U.S. President Theodore Roosevelt went on a four-day bear hunt in Mississippi. The president's hosts had captured a bear cub and tied it to a tree to ensure that their esteemed guest would get a kill on his outing. Roosevelt surprised his hosts when he refused to shoot the ursine youngster, and Berryman immortalized "Teddy's Bear" in a cartoon for the Washington Post. Whenever Berryman featured the president in a drawing, there too was the little bear. American toymakers, most notably the Ideal Company, rushed to churn out teddy bear toys, but the Steiff bears had already earned the distinction of being first. Ironically, not one of the original (and unmarked) 3,000 Steiff bears brought to the United States is known to exist.

When Richard Steiff traveled to the 1904 World's Fair in St. Louis, he discovered a bear craze. Steiff's model won a Grand Prize at the exposition, while Richard and his aunt received gold medals. Unit sales of the bears tripled to 12,000 by the end of the year and increased to almost one million worldwide by 1907. The original poseable bear had internal rods to facilitate movement of the arms, legs, and head, but a cuddlier and lighter version was soon developed that incorporated discs in the limbs and a ball joint for the head. To distinguish its products from the many knockoffs that soon appeared, the Steiffs patented the "Knopf-im-Ohr" or "Button-in-Ear" trademark. From 1904 on, all of the company's products featured an embossed button in the left ear (if the animal had an ear, that is). The first buttons were blank and for a couple of years the corporate elephant appeared on the marque, but after 1906 most buttons featured the Steiff name. (Reproductions of early models often duplicate the particular trademark original to the toy.)

Though bears continued to form the cornerstone of Steiff's success, the company diversified its toy offerings throughout the 1900s. Internal noisemakers--including growlers for bears, purrers for cats, and squeakers for a variety of animals&mdashded to the toys' appeal. Dolls that said "mama" and caricature dolls of different professions were also added, as well as puppet animals and clothed animals. Kites and pull toys also joined the product line. In 1910 the company launched the large-scale, mechanized window display pieces that it would continue to produce throughout the 20th century.

A Toymaker Turns to War

Wartime proved particularly difficult for the toymaking Steiffs. Richard, Paul, and Hugo were drafted into the service in World War I. During and for a period following the conflict, Steiff suffered shortages of raw materials and was compelled to make substitutions for its usually high-quality materials. Cheaper fabrics and paperlike substances were used to make tiny uniformed soldiers and other toys. A British embargo that began in 1914 only exacerbated the difficult situation. By 1916 all of Germany's borders were closed. Steiff's workers were kept occupied with the production of military materiel including gas masks, canteen covers, hand grenade handles, and other items. The German economy continued to suffer in the immediate postwar years, during which time Steiff concentrated on manufacturing wooden toy chests and children's furniture.

In the 1920s Steiff introduced scooters, toy cars, and lifelike toddler dolls named after their designer, Albert Schlopsnies. A gifted artist, Schlopsnies also designed elaborate window displays, advertising pieces, and toys for Steiff. The company continued to expand its menagerie of stuffed or plush toys to include rabbits, ducks, and pigs, but the most popular items of the decade proved to be dogs and cats. As the 1920s waned Steiff once again fell on hard times, for not only was it hard for Depression-era parents to justify expensive toy purchases, but growing anti-German sentiment abroad devastated Steiff's export markets. The company reduced production and staffing and, as it had during early economic downturns, made materials substitutions. One high point of the 1930s was Steiff's German license to manufacture Walt Disney's Mickey and Minnie Mouse toys.

During World War II many of the company's employees were drafted into the service. The Hitler regime removed both Hugo and Ernst Steiff from their posts and installed cronies. Richard, who was by this time living in the United States but still played an important role in the family business, died in 1939. The company ran out of mohair in 1943 and made hats through 1944, but materials and manpower grew so scarce that the factory was forced to stop making toys in 1943. Longtime managing director Otto Steiff died in 1944. The Steiff archive of toys was one of the few survivors of the war. It would prove invaluable in the decades to come.

It was 1946 before Steiff resumed production with a ten-item line of artificial-silk stuffed toys. During the Allied occupation of Germany after World War II, toys had a special "U.S. Zone tag" in the arm seam.

The development of a hedgehog dubbed "Mecki" in 1950 launched a midcentury toy craze. The rubber-faced toy, his wife Micki, and their progeny Macki and Mucki, would become the mascots for the widely read German magazine HÖR ZU. Teddy bears evolved rapidly to meet changing tastes during the 1950s and 1960s. Shorter limbs, rounder faces, softer bodies, and modern (yet still high-quality) materials soon identified these postwar creations. Over the course of the ensuing decades Steiff continued to grow and expand its menagerie of plush animals to include species familiar and exotic. Raccoons, manatees, life-sized St. Bernards, lobsters, spiders, lions, tigers, goats, bats, and literally thousands of other beasts joined the line. The company even produced sports mascot toys representing the Army mule, Navy goat, Princeton tiger, Duke devil, and Yale bulldog. By the late 1990s Steiff had offered almost 15,000 different stuffed animals.

Teddy Craze Revisited in 1980s and 1990s

Steiff believes that Americans have collected its bears since the 1930s, but antique teddy bears did not really begin to bring headline-grabbing prices at auction until the mid-1980s. The secondary market proved somewhat idiosyncratic, for while other antiques and collectibles were judged largely on age and condition&mdash′eferably mint--a teddy bear's value was determined in part by less tangible factors like "personality." In fact, signs of wear were often considered badges of love and sometimes boosted the price brought at auction.

In 1994 Yoshi Sekiguchi, president of Japanese toymaker Sun Arrow Co., established the record-holding auction price for a teddy bear: DM 270,000 (US$170,000) for a 1904 model. Named "Teddy Girl," the toy had a particularly unique history. It was produced in 1904 or 1905 and given to Robert Henderson. Henderson would go on to create the British chapter of Good Bears of the World, a philanthropy that donated teddies to hospitalized children. Teddy Girl was his first and only teddy bear. As of 1997 Steiff bears had brought the ten highest prices at auction in the secondary teddy bear market.

The company capitalized on the craze by promoting its products as much as collectors items and "investments" as children's toys. Steiff's home page on the World Wide Web wryly noted, "The high prices that Steiff teddy bears continue to fetch at auction must surely generate extra interest in new Steiff teddies and other animals in toy and gift retail outlets." Managing Director R&ouml⁄er estimated that more than 30 percent of the company's goods were purchased by adults for adults. Children certainly were not buying them with their allowance money. Prices for new Steiff pieces ranged from $25 for a synthetic ladybug to $5,000 for a signature eight-foot giraffe and $6,000 for a five-foot tiger. Furthermore, the company created a Collectors Club for dues-paying teddy fans and through the production of limited edition reproductions of classic models. By 1997 the Club boasted more than 40,000 members. Beginning in 1980 reproductions were made from original drawings and used original materials, including mohair and excelsior wood shavings.

The company took care not to oversaturate the market, however, and thereby risk reducing its cachet among collectors. For example, some lines produced in honor of the sesquicentennial of Margarete Steiff's birth in 1997 were limited to 1,847--a number determined by the year the founder was born. In fact, the company reduced its line of products from 900 different models in the mid-1990s to about 650 by 1998.

With domestic sales lagging, Steiff established a U.S. subsidiary in 1992. The company had established its first U.S. showroom in New York in 1903. Geo. Borgfelt acted as the company's exclusive agent in the United States throughout the early 20th century. In the 1950s and 1960s the manufacturer was represented by two companies, Reeves International and Loucap Company. In the mid-1960s Reeves earned the exclusive distribution rights. After establishing its own American operation, Steiff upped its advertising budget and began running promotions in magazines like Traditional Home and Gourmet with the tagline, "It's not just stuff--it's Steiff." Sales via televised shopping networks like QVC generated $1 million in 1997. By that time an estimated ten percent of total sales were generated in the United States.

The craze spread to Japan in 1993, when a picture of a young member of the country's royal family holding a Steiff bear was broadcast on television. That free publicity combined with the news of the new record bear price set by Sekiguchi boosted Steiff sales in Japan from virtually nothing in 1993 to US$2.4 million by 1997. The company established its own stores in Tokyo, Taipei, and Singapore and planned to penetrate mainland China in 1998.

Steiff's worldwide revenues were expected to exceed DM 100 million (US$56 million) for the first time in 1997. With its long heritage, dedication to quality, and literally fanatical following, the company seemed assured of setting new sales records for many years to come.

Principal Subsidiaries: Steiff USA L.P.